چکیده انگلیسی

We forecast the economic consequences of a widespread contamination of the food system based on a hypothetical outbreak of foot-and-mouth disease (FMD). Since the immediate effect on the livestock sector could affect the entire supply chain and US livestock, meat and dairy exports, we measure these impacts using GTAP, a multi-region, multi-sector computable general equilibrium (CGE) model of the global economy. The immediate “shocks” to the US livestock, raw milk and other animal products sectors indirectly affect all sectors of the economy, as well as international markets and trade. We decompose these effects due to each component of the initial shocks, and estimate the importance of these shocks to the national food system for the Mid-Atlantic Region using IMPLAN. Our GTAP results indicate that losses to the USA economy would be about $11.7 billion, and with the ripple effect throughout the rest of the world including beneficiary nations (Argentina, Brazil, Latin America, Australia and New Zealand) and losers (Canada, Mexico, European Union) would be 14.1 billion. We estimate the proportion of the domestic impact affecting the Mid-Atlantic Region. Based on a regional input–output model of that region, we estimate that total losses in value added are nearly $800 million; losses in labor income total about $565 million; and there are job losses of just over 12 thousand.

مقدمه انگلیسی

Over the past decade there has been increased concern about a major biosecurity event affecting US agriculture, its marketing channels, and international trade. This awareness was a natural consequence of the events of September 2001 and for the first part of the past decade there was much focus on what has been termed agroterrorism. The Congressional Research Service (CRS) views agroterrorism as “a subset of bioterrorism, and is defined as the deliberate introduction of an animal or plant disease against livestock or into the food supply with the goal of generating fear, causing economic losses, and/or undermining stability” (Dykes, 2010, p. 11). Currently, our more general concern about biosecurity draws only a fine line between events that might occur naturally and those initiated intentionally by foreign or domestic actors.
Somewhat surprisingly, few economists have taken notice. The related published literature on the matter is scant, despite the billions of dollars spent on prevention and monitoring, and the passage of the Bioterrorism Act of 2002 that altered the way in which agricultural and food products are transported, imported, exported, and otherwise accounted for throughout the food system.1 What is clear is that in the aggregate the economic consequences of biosecurity events can differ widely. At one extreme, the low‐grade avian influenza that affected many flocks in the early to mid‐2000's was resolved rapidly by the prevention activities of state departments of agriculture and APHIS. The discovery of a ‘mad cow’ in December, 2003, was rapidly traced to a Canadian herd; preventative measures ensured that no meat entered the food market. Within weeks all major impacts were resolved, although trade effects lingered for some time. The initial fall in live cattle futures prices due to the dire predictions was negated by a positive outlook.
In contrast, the economic consequences of other biosecurity events may be much more extensive within the United States, but may also extend beyond the domestic borders, disrupting trade among countries and may lead to trade embargos as other countries attempt to protect their agricultural industries and food supplies. One could imagine how such a series of economic consequences could accompany the discovery of a case of foot-and-mouth disease in any of the contiguous states. The immediate consequence would likely be a large‐scale eradication of livestock herds, but a global embargo, spearheaded by the disease‐free regions, may ensue as well. To illustrate, Great Britain's outbreak of foot-and-mouth disease (FMD) in 2001 prompted the slaughter of more than four million farm animals, and led to billions of dollars in losses to farmers. Domestic consumption of beef in the UK fell dramatically, and the decline in British beef exports was a major disruption in international trade.2 The economic costs were estimated at about ₤3.1 billion to agriculture and the food chain, and there were further losses of between ₤2.7 and ₤3.2 billion to businesses directly affected by reduced expenditures from tourists. This disease is a major constraint to the international livestock trade. In March 1997 with a single pig imported to Taiwan from Hong Kong the disease spread throughout Taiwan in 6 weeks with authorities slaughtering more than eight million pigs and barring exports. Ultimate costs were estimated to be at least $19 billion, $4 billion to eradicate the disease and another $15 billion in trade losses (Dykes, 2010). In 2002, the mere rumor of FMD in Kansas resulted in a $50 million scare (Dykes, 2010).3

نتیجه گیری انگلیسی

Due to the vulnerability of our nation's food system to natural or terrorist-induced contamination, the policy significance of being able to predict the likelihood and scope of such an event is apparent. Given the scarcity of funds for prevention (e.g. increased supply chain and on-farm security), an understanding of the extent of the economic costs is critical information for policy makers faced with difficult decisions of where to allocate scarce security resources. It is also important to understand the relationships between such events and consumer demand for agricultural and food products, and to document the event's economic effects by major economic sector. In this era of increased globalization, these events and their economic consequences also take on added regional, national and international significance.
To contribute to this policy research agenda, we forecast the economic consequences of a major, but hypothetical, event leading to widespread contamination of the food system. For the simulation, we assume that there is an outbreak of foot-and-mouth disease (FMD). Our choice is based primarily on the fact that it would be reasonably easy to transport the disease into the United States and to disseminate it among feedlots and farms across the country. Our investigation involves two novel steps. First, we disaggregated the livestock and dairy sectors of GTAP into cattle, dairy, and other livestock and measure a FMD shock with 10%, 10% and 5% reductions respectively. We run separate GTAP models for each of these shocks independently and then present a worst‐case scenario with all three shocks occurring simultaneously, along with an export ban. Because GTAP is a global model, we cannot use GTAP to investigate regional impacts directly, so in a second stage, we pro rate estimated GTAP reductions in final demand by sector to the Mid-Atlantic Region and estimate regional impacts using a regional input–output model generated from the IMPLAN data base.
Our GTAP results indicate that losses to the US economy would be about $11.7 billion, and with the ripple effect throughout the rest of the world including beneficiary nations (Argentina, Brazil, Latin America, Australia and New Zealand) and losers (Canada, Mexico, European Union) would be 14.1 billion. We estimate the proportion of the domestic impact affecting the Mid-Atlantic region. Based on a regional input–output model of that region, we estimate that total losses in value added are nearly $800 million; losses in labor income total about $565 million; and there are job losses of just over 12,000.
In the empirical results, it is no surprise that much of the reduction in global social welfare due to the simulated FMD outbreak occurs in the United States. Although much smaller, there are noticeable changes in social welfare among the major US trading partners. Those in North America and the EU would experience modest reductions in social welfare, while others in Latin and South America and New Zealand and Australia would realize modest gains due to changes in trade patterns. A ban on livestock exports from the United States to FMD-free regions in response to the FMD outbreak would only account for about 8% of the loss in social welfare.
Through our decomposition of the effects of the direct shocks to various sectors, it is also clear that the largest share of the total effects will stem from the shocks to sectors in production agriculture whose products are likely to have the most value added to them prior to final consumption. Thus, for the same proportional direct shock, the reduction in social welfare due to the shock to milk production was about 1/3 larger than for the livestock sector.
The impact of the disruption “ripples” through the major agricultural sectors disproportionately, both here and abroad. Thus, when taken together the reductions in output in the sectors directly shocked by FMD exceed the direct reductions for raw milk, but the differences are minimal—a 10% direct reduction in output vs. a total reduction of only 10.5%. The 10% direct shock to the livestock sectors results in a 12.5% total reduction in output, but the 5% direct shock to the other-animal sector leads to a reduction in output exceeding 9%. These are largely due to the direct shocks—80% in the livestock sector, 97% for raw milk, but only 55% for the other-animal sector. However, through our decomposition analysis, we discover that in all cases, the sums of the percentage changes in output attributable to the individual shocks and the ban on exports exceed 100%, and by as much as 12% in the case of livestock. Thus, it is through the interconnection among sectors that the reductions in output in any sector due to the combined shocks is up to 12% smaller than if each shock were to occur in isolation.
With the upward shift in the supply curves for the output of these sectors affected directly, the prices for livestock increase by about 27%, while milk prices would increase by about two-thirds, and prices of dairy products by nearly 20%. Due to the closing of significant export markets for these commodities, a larger portion of the reduced production becomes available in domestic markets and puts downward pressure on prices. Downward pressure is introduced as opportunities for otherwise high-cost producing countries to export to the United States.
Once these shocks have worked their way through both the domestic and international markets, they translate into substantial changes in consumer final demand for the output of these sectors. In the livestock sector, for example, consumer final demand is down by just over 11%, while milk and dairy product demands are reduced by about 23% and 8%, respectively. Final consumer demand in the meat processing sectors falls on average by about 3%, while the demand for products in the other animal sector falls by nearly 4.5%.
By apportioning these changes in final demand according to population, we are able to assess the economic impact on the Mid-Atlantic Region through a regional input–output model constructed to include the states of New York, New Jersey, Pennsylvania, Maryland, and Delaware. The total reduction in sales across all sectors is estimated at just under $2.3 billion. Of this total, about 45% is associated with the direct reduction in final demand, while about 38% is due to the indirect effects, and the remaining 16% of the total is due to the induced effects associated with reduced income.
While losses in sales are important to document, the implications of such an FMD outbreak are perhaps most easily understood in terms of the associated reductions in value added (mostly payments to labor and capital), labor income, and employment. Across the region, total value added falls by $800 million, and nearly $565 million is the reduction in labor income due to a loss in nearly 12,100 jobs. However, due to the differential wage structure across section, it is evident from our empirical results that the losses in income and employment are distributed quite differently by sector from the losses in sales.
In conclusion, it is evident that one can develop methods by which to estimate in an internally consistent fashion the global, national and regional economic impacts from a major food contamination event. One obvious extension would be to decompose the effects nationally to the various major economic regions of the United States. This sentiment is echoed by those involved in the Project on National Security Reform (PNSR) (2009) a nonpartisan non-profit organization mandated by the US Congress to recommend improvements to the US national security system. They recommend that the modeling capacity of the government should be expanded to allow for analysis of the impacts of events whose direct effects are concentrated regionally, but whose impacts may spill over to other regions. These interactions among regions could be accounted for through the construction of an interregional input–output model (e.g. Hughes and Holland, 1994, Lindall et al., 2006 and Miller and Blair, 1985).
From a policy perspective, these types of analyses are most useful for disaster preparedness and mitigation and relief planning. Through a careful analysis of a number of alternative scenarios that differ in intensity and geographic location, one can learn a great deal about mobilizing resources to prepare and respond to actual events. However, given the potential scope of such events, it makes sense for Federal and perhaps state governments to develop and maintain this type of modeling capacity. This type of capacity has existed in those Federal agencies in charge of national security, but access to these efforts is understandably limited. An excellent example of related modeling capacity that is generally and publically available is HAZUS-MH (2011), a nationally applicable standardized methodology that estimates potential losses from earthquakes, hurricane winds, and floods. HAZUS-MH was developed by the Federal Emergency Management Agency (FEMA) under contract with the National Institute of Building Sciences (NIBS).